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Saturday, July 12, 2014

BUDGET-2014 CHANGES IMPACTING NGO SECTOR

Budget is generally a disappointment for the NGO community, with only a very few benefits.

CSR expenditure of companies not to be tax deductible. Thus a big disappointment for companies, who now may resort to camouflage it under other sections. Or it may benefit NGOs who have S.35AC registration.

Other provisions for NGOs (generally referred to as Charitable Trusts)

Clarification provided for ‘substantially financed’

Certain educational & medical institutions registered under S. 10(23) (under sub-clauses iiiab & iiiad) are exempt from tax if ‘substantially financed by the Govt.’ Currently substantial has not been defined in the Act and courts interpret this based on other provisions in the Act. Govt will now specify exact % of total receipts (including donations, etc., if any), which will entitle the concerned institution to claim exemption from its entire income.

Claim both for Depreciation as well as cost of asset not to be allowed

A Trust which has included acquisition cost of an asset in the application amount, canot again claim depreciation.

Claims under multiple sections not allowed

If a charitable Trust has been registered / approved under. 12AA / S. 10(23), it cannot claim benefit under any other clause of S. 10, except for agriculture income.

Additional powers given to Commissioner for cancellation of S. 12AA registration

Commissioner given additional power to cancel S.12AA registration under following circumstances:

1. If income/property of Trust, applied for the benefits of specified persons, like trustee

2.If funds are invested in prohibited modes.

3.It is found that charitable trust is generally not applying the income of Trust for public in general.

Relief in case of delayed S.12AA registration

In case of delayed registration under S. 12, any pending assessment on the date of registration would be considered for providing benefit under S. 12A, but not the assessments which are already complete.